HOUSTON, Feb. 28, 2017 /PRNewswire/ -- TESCO
Corporation ("TESCO" or the "Company") (NASDAQ: TESO) today
reported fourth quarter 2016 financial and operating results.
Fourth Quarter Operating Results
Fernando Assing, TESCO's Chief
Executive Officer, commented, "We are encouraged by our improved
sequential financial performance as activity levels respond to
higher commodity prices and rig count. However, we remain cautious
as we recognize that 2017 will still present challenges in
international and offshore markets as well as increasing cost
escalation risks and limited pricing power in North America."
TESCO reported revenue of $35.3
million for the fourth quarter ended December 31, 2016, up from $30.4 million, or 16% in the third quarter of
2016, and down from $52.2 million, or
32% for the fourth quarter of 2015. The sequential increase in
revenue was primarily from higher aftermarket part sales and
increased activity in both U.S. land and offshore tubular services
markets.
TESCO reported a U.S. GAAP net loss of $20.1 million, or $(0.43) per diluted share, for the fourth quarter
ended December 31, 2016. Adjusted net
loss for the quarter was $13.3
million, or $(0.28) per share,
excluding special items, consisting primarily of several charges
related to receivables and restructuring costs. This compares to a
U.S. GAAP net loss of $22.1 million,
or $(0.48) per diluted share in the
third quarter of 2016, and a U.S. GAAP net loss of $78.1 million, or $(2.00) per diluted share, for the fourth quarter
of 2015. Adjusted net loss in the third quarter of 2016 was
$17.3 million, or $(0.37) per diluted share, and in the fourth
quarter of 2015 was $13.4 million, or
$(0.33) per diluted share.
Adjusted EBITDA loss was $4.4
million for the fourth quarter compared to adjusted EBITDA
loss of $9.1 million in the third
quarter of 2016, an improvement of 52%. Fourth quarter 2016 U.S.
GAAP operating loss was $18.9 million
and adjusted operating loss was $13.1
million, which excludes the impact of $5.8 million of pre-tax charges. This compares to
the third quarter 2016 U.S. GAAP operating loss of $21.9 million and adjusted operating loss of
$17.4 million, which excluded
$4.5 million of pre-tax charges.
Cash and cash equivalents as of December
31, 2016 increased from the third quarter by $1.4 million to $91.5 million primarily due to
$3.5 million of positive operating
cash flow.
Adjusted free cash flow was $2.5
million before approximately $0.4
million of restructuring payments, compared to negative
adjusted free flow of $5.7 million in
the prior quarter. The sequential increase was primarily caused by
lower operating losses, inventory reductions, higher collections
and tax refunds.
Products Segment
- Revenue for Q4 2016 was $18.8
million, a $1.8 million, or
11% increase from Q3 2016 and a $6.7
million, or 26% decrease from Q4 2015.
- Product sales for Q4 2016 included 6 top drive units (4 new and
2 used) and 2 used catwalks, compared to 3 units (3 new and 0 used)
sold in Q3 2016 and 17 units (6 new and 11 used) sold in Q4
2015.
- There were 116 top drives in our rental fleet at the end of the
fourth quarter with a utilization of 18%, down from 118 at the end
of the third quarter.
- U.S. GAAP operating loss before adjustments in the Products
segment for Q4 2016 was $5.3 million,
or 28% of sales, a $2.1 million, or
28% improvement from Q3 2016. Fourth quarter operating loss and
operating margin after adjustments were $1.6
million and (9)%, respectively. This sequential increase in
profitability was due primarily to an increase in aftermarket sales
and a more profitable mix of product sales.
- At December 31, 2016, top drive
backlog was 10 units, with a total potential value of $9.3 million, compared to 9 units at September 30, 2016, with a potential value of
$7.8 million. This compares to a
backlog of 8 units at December 31,
2015, with a potential value of $7.2
million. Today, our top drive backlog stands at 9 units with
a potential value of $8.1
million.
Tubular Services Segment
- Revenue for Q4 2016 was $16.5
million, a $3.1 million, or
23% increase from Q3 2016 and a $10.2
million, or 38% decrease from Q4 2015. This sequential
increase was driven primarily by higher activity in both U.S. land
and offshore markets.
- U.S. GAAP operating loss before adjustments in the Tubular
Services segment for Q4 2016 was $6.9
million, a $1.1 million or 14%
improvement from Q3 2016. Fourth quarter operating loss and
operating margin after adjustments were $5.3
million and (32)%, respectively. Incremental profitability
benefited from higher land accessory sales and higher offshore
activity in the Gulf of
Mexico.
Other Segments and Expenses
- Research and engineering U.S. GAAP costs for Q4 2016 were
$1.5 million, compared to
$1.2 million in Q3 2016 and
$2.2 million in Q4 2015. We continue
to invest in the development, commercialization, and enhancement of
our proprietary technologies.
- Corporate and other U.S. GAAP costs for Q4 2016 were
$5.2 million, flat from Q3 2016 and a
$1.4 million, or 21%, decrease from
Q4 2015. On an adjusted basis, the Q4 2016 costs decreased by
$0.3 million and $0.9 million from Q3 2016 and Q4 2015,
respectively.
- Net foreign exchange losses for Q4 2016 were $1.1 million, primarily from the devaluation of
the Egyptian pound, compared to $0.4
million in Q3 2016 and $8.6
million in Q4 2015. The largest foreign exchange losses in
Q4 2015 were from Latin
America.
- The effective tax rate for Q4 2016 was a 1% benefit compared to
a 2% benefit in each of Q3 2016 and Q4 2015.
- Total capital expenditures were $2.6
million in Q4 2016, primarily for offshore tubular services
equipment, partially offset by asset sale proceeds of $1.2 million.
Outlook
While North America rig count
is expected to continue to increase during 2017, weakness in
international and offshore markets is anticipated to continue. We
see some opportunities to start to increase pricing in North America, however prevalent overcapacity
will likely limit pricing power throughout 2017. We are also facing
risks that cost escalation, which includes labor inflation and
shortages, incremental logistics and equipment reactivation will
exceed price increases in the short term.
In the first quarter of 2017;
- Products revenue is expected to be higher sequentially from
higher new top drive sales, partially offset by lower rental
utilization in certain markets. Aftermarket revenue is expected to
increase slightly following recent increases in quoting activity.
Products adjusted operating loss is expected to be approximately
flat sequentially.
- Tubular Services revenue and adjusted operating loss are
expected to be flat to down sequentially as increased North America land activity is offset by
reduced international land activity and lower offshore activity and
the impact of cost escalation.
- Corporate and R&E expenses are expected to increase
sequentially in the first quarter as we restore certain employee
costs and benefit plans to remain competitive in a tightening labor
market.
- As a result, adjusted EBITDA loss is expected to be slightly
higher sequentially in the first quarter. We also expect cash
levels to decline due to operating losses, U.S. property taxes and
restructuring payments.
For the full year of 2017, our objective is to pursue
opportunities for higher new product and aftermarket sales as well
as increased land and offshore tubular services activity. However,
our incremental profitability will be highly dependent on securing
increased pricing, managing cost escalation risks and increasing
the adoption of our higher margin new products and services.
"During the fourth quarter and through this quarter, we have
made continued progress on several key initiatives, including CDS™
Evolution adoption, top drive performance upgrades and ARC™
contracts. Customer interest in offerings that reduce cost and
improve drilling performance continues to increase," Mr. Assing
said. "In addition, we committed to additional restructuring
actions starting in the fourth quarter to reduce our fixed cost
structure."
"Within Products, we recently performed our first field trial of
the Pipe Drive system and are making certain enhancements as we
prepare for the next upcoming field trial. With ARC, we continued
to increase the number of contracted installations in established
markets with customer trials in new international markets ongoing.
Finally, we booked several top drive performance upgrade jobs that
will begin shipping in the first quarter."
"In Tubular Services, we sequentially increased the revenue from
CDS Evolution in our targeted trial U.S. markets. We also performed
additional field trials of our new multi-plug launcher, which is
planned to go into full production in the second quarter. Global
markets are increasingly understanding the value proposition of
automated casing running, growing our opportunities for new and
used CDS sales along with our service offering."
"As the market begins to recover, we remain highly focused on
returning to a quarterly breakeven EBITDA run rate while minimizing
cash usage over the next several quarters. To accomplish this, our
core strategic priority continues to be to leverage our existing
platform by: 1) growing CDS land Evolution adoption and gaining
offshore Tubular Services market share, 2) accelerating all AMSS
offerings as rigs reactivate, 3) commercializing our new pipe
handling products, and 4) increasing the market share and features
of our ARC platform. At the same time, we must carefully manage the
ramp-up risks related to safety, quality, cost escalation and
working capital management. We are prepared to take on these
challenges and again thank our shareholders for their support
during this very difficult market," Mr. Assing concluded.
Conference Call
The Company will conduct a conference call to discuss its
results for the fourth quarter of 2016 on February 28 at 9:00 a.m.
Central Time. To participate in the conference call,
dial 1-877-407-0672 inside the U.S. or 1-412-902-0003 outside the
U.S. approximately 10 minutes prior to the scheduled start time.
The conference call and all questions and answers will be recorded
and made available until March 14. To
listen to the replay, call 1-877-660-6853 inside the U.S. or
1-201-612-7415 outside the U.S. and enter conference ID
13654977#.
The conference call will be webcast live as well as by replay at
the Company's web site, www.tescocorp.com. Listeners may access the
call through the "Conference Calls" link in the Investors section
of the site.
TESCO Corporation is a global leader in the design, manufacture
and service of technology based solutions for the upstream energy
industry. The Company's strategy is to change the way people drill
wells by delivering safer and more efficient solutions that add
real value by reducing the costs of drilling for and producing oil
and natural gas. TESCO® is a registered trademark in
the United States, Canada and the European Union.
For further information please contact:
Chris
Boone (713) 359-7000
TESCO Corporation
Caution Regarding Forward-Looking Information and Risk
Factors
This news release contains forward-looking statements within
the meaning of Canadian and United
States securities laws, including the United States Private
Securities Litigation Reform Act of 1995. From time to time, our
public filings, press releases and other communications (such as
conference calls and presentations) will contain forward-looking
statements. Forward-looking information is often, but not always
identified by the use of words such as "anticipate," "believe,"
"expect," "plan," "intend," "forecast," "target," "project," "may,"
"will," "should," "could," "estimate," "predict" or similar words
suggesting future outcomes or language suggesting an outlook.
Forward-looking statements in this press release include, but are
not limited to, statements with respect to expectations of our
prospects, future revenue, earnings, activities and technical
results.
Forward-looking statements and information are based on
current beliefs as well as assumptions made by, and information
currently available to, us concerning anticipated financial
performance, business prospects, strategies and regulatory
developments. Although management considers these assumptions to be
reasonable based on information currently available to it, they may
prove to be incorrect. The forward-looking statements in this news
release are made as of the date it was issued and we do not
undertake any obligation to update publicly or to revise any of the
included forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
By their very nature, forward-looking statements involve
inherent risks and uncertainties, both general and specific, and
risks that outcomes implied by forward-looking statements will not
be achieved. We caution readers not to place undue reliance on
these statements as a number of important factors could cause the
actual results to differ materially from the beliefs, plans,
objectives, expectations and anticipations, estimates and
intentions expressed in such forward-looking statements.
These risks and uncertainties include, but are not limited
to, the impact of: levels and volatility of oil and gas
prices; cyclical nature of the energy industry and credit risks of
our customers; fluctuations of our revenue and earnings; operating
hazards inherent in our operations; changes in governmental
regulations, including those related to the climate and hydraulic
fracturing; consolidation or loss of our customers; the highly
competitive nature of our business; technological advancements and
trends in our industry, and improvements in our competitors'
products; global economic and political environment, and financial
markets; terrorist attacks, natural disasters and pandemic
diseases; our presence in international markets, including
political or economic instability, currency restrictions and trade
and economic sanctions; cybersecurity incidents; protecting and
enforcing our intellectual property rights; changes in, or our
failure to comply with, environmental regulations; restrictions
under our credit facility that that may limit our ability to
finance future operations or capital needs and could accelerate our
debt payments; failure of our manufactured products and claims
under our product warranties; availability of raw materials,
component parts and finished products to produce our products, and
our ability deliver the products we manufacture in a timely manner;
retention and recruitment of a skilled workforce and key employees;
and ability to identify and complete acquisitions. These risks and
uncertainties may cause our actual results, levels of activity,
performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. When
relying on our forward-looking statements to make decisions,
investors and others should carefully consider the foregoing
factors and other uncertainties and potential events.
Copies of our Canadian public filings are available through
www.TESCOcorp.com and on SEDAR at www.sedar.com. Our U.S. public
filings are available at www.sec.gov and through
www.TESCOcorp.com.
The risks included here are not exhaustive. Refer to "Part I,
Item 1A - Risk Factors" in our most recent Annual Report on Form
10-K for further discussion regarding our exposure to risks.
Additionally, new risk factors emerge from time to time and it is
not possible for us to predict all such factors, nor to assess the
impact such factors might have on our business or the extent to
which any factor or combination of factors may cause actual results
to differ materially from those contained in any forward looking
statements. Given these risks and uncertainties, investors should
not place undue reliance on forward-looking statements as a
prediction of actual results.
TESCO
CORPORATION
Condensed
Consolidated Statements of Income
(in millions,
except per share information)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(Unaudited)
|
|
|
|
|
Revenue
|
$
|
35.3
|
|
|
$
|
52.2
|
|
|
$
|
134.7
|
|
|
$
|
279.7
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of sales and
services
|
43.2
|
|
|
70.9
|
|
|
178.0
|
|
|
296.6
|
|
Selling, general and
administrative
|
9.5
|
|
|
12.0
|
|
|
30.2
|
|
|
41.9
|
|
Goodwill
impairment
|
—
|
|
|
34.4
|
|
|
—
|
|
|
34.4
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Research and
engineering
|
1.5
|
|
|
2.2
|
|
|
5.8
|
|
|
9.2
|
|
|
54.2
|
|
|
119.5
|
|
|
249.5
|
|
|
382.1
|
|
Operating
loss
|
(18.9)
|
|
|
(67.3)
|
|
|
(114.8)
|
|
|
(102.4)
|
|
Interest expense
(income), net
|
(0.1)
|
|
|
0.5
|
|
|
0.3
|
|
|
1.3
|
|
Foreign exchange
loss
|
1.1
|
|
|
8.6
|
|
|
2.7
|
|
|
15.1
|
|
Other expense
(income)
|
—
|
|
|
(0.1)
|
|
|
0.2
|
|
|
(0.3)
|
|
Loss before income
taxes
|
(19.9)
|
|
|
(76.3)
|
|
|
(118.0)
|
|
|
(118.5)
|
|
Income tax provision
(benefit)
|
0.2
|
|
|
1.8
|
|
|
(0.1)
|
|
|
15.3
|
|
Net loss
|
$
|
(20.1)
|
|
|
$
|
(78.1)
|
|
|
$
|
(117.9)
|
|
|
$
|
(133.8)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.43)
|
|
|
$
|
(2.00)
|
|
|
$
|
(2.73)
|
|
|
$
|
(3.43)
|
|
Diluted
|
$
|
(0.43)
|
|
|
$
|
(2.00)
|
|
|
$
|
(2.73)
|
|
|
$
|
(3.43)
|
|
Dividends per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.20
|
|
Weighted average
number of shares (millions):
|
|
|
|
|
|
|
|
Basic
|
46.5
|
|
|
39.1
|
|
|
43.2
|
|
|
39.0
|
|
Diluted
|
46.5
|
|
|
39.1
|
|
|
43.2
|
|
|
39.0
|
|
TESCO
CORPORATION
Condensed
Consolidated Balance Sheets
(in
millions)
|
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
91.5
|
|
|
$
|
51.5
|
|
Accounts receivable
trade, net
|
33.3
|
|
|
64.3
|
|
Inventories,
net
|
76.2
|
|
|
95.5
|
|
Other current
assets
|
20.0
|
|
|
25.2
|
|
Total current
assets
|
221.0
|
|
|
236.5
|
|
Property, plant and
equipment, net
|
120.7
|
|
|
177.7
|
|
Other
assets
|
2.6
|
|
|
7.5
|
|
Total
assets
|
$
|
344.3
|
|
|
$
|
421.7
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
13.5
|
|
|
14.3
|
|
Accrued and other
current liabilities
|
17.1
|
|
|
27.2
|
|
Income taxes
payable
|
2.1
|
|
|
1.4
|
|
Total current
liabilities
|
32.7
|
|
|
42.9
|
|
Other
liabilities
|
1.6
|
|
|
2.2
|
|
Deferred income
taxes
|
0.4
|
|
|
1.6
|
|
Shareholders'
equity
|
309.6
|
|
|
375.0
|
|
Total
liabilities and shareholders' equity
|
$
|
344.3
|
|
|
$
|
421.7
|
|
TESCO
CORPORATION
Consolidated
Statement of Cash Flows
(in
millions)
|
|
|
For the years
ended
December 31,
|
|
2016
|
|
2015
|
Operating
Activities
|
|
|
|
Net loss
|
$
|
(117.9)
|
|
|
$
|
(133.8)
|
|
Adjustments to
reconcile net loss to cash used in operating activities
|
|
|
|
Depreciation and
amortization
|
29.3
|
|
|
38.1
|
|
Stock compensation
expense
|
5.0
|
|
|
3.5
|
|
Bad debt
expense
|
3.8
|
|
|
3.1
|
|
Deferred income
taxes
|
(0.2)
|
|
|
10.2
|
|
Amortization of
financial items
|
0.4
|
|
|
0.3
|
|
Gain on sale of
operating assets
|
(1.3)
|
|
|
(1.8)
|
|
Goodwill
impairment
|
—
|
|
|
34.4
|
|
Long-lived asset
impairments
|
35.5
|
|
|
—
|
|
Changes in the fair
value of contingent earn-out obligations
|
(0.1)
|
|
|
(0.9)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable
trade, net
|
27.0
|
|
|
61.5
|
|
Inventories
|
19.2
|
|
|
19.4
|
|
Prepaid and other
current assets
|
5.1
|
|
|
7.6
|
|
Accounts payable and
accrued liabilities
|
(12.0)
|
|
|
(41.3)
|
|
Income taxes payable
(recoverable)
|
2.9
|
|
|
(7.1)
|
|
Other noncurrent
assets and liabilities, net
|
1.2
|
|
|
0.2
|
|
Net cash used in
operating activities
|
(2.1)
|
|
|
(6.6)
|
|
Investing
Activities
|
|
|
|
Additions to
property, plant and equipment
|
(7.1)
|
|
|
(15.3)
|
|
Proceeds on sale of
operating assets
|
4.1
|
|
|
6.7
|
|
Other, net
|
—
|
|
|
1.7
|
|
Net cash used in
investing activities
|
(3.0)
|
|
|
(6.9)
|
|
Financing
Activities
|
|
|
|
Proceeds from
exercise of stock options
|
—
|
|
|
0.3
|
|
Dividend
distribution
|
—
|
|
|
(7.8)
|
|
Proceeds from stock
issuance
|
47.9
|
|
|
—
|
|
Equity issuance
costs
|
(0.3)
|
|
|
—
|
|
Changes in restricted
cash
|
(2.5)
|
|
|
—
|
|
Net cash provided by
(used in) financing activities
|
45.1
|
|
|
(7.5)
|
|
Change in cash and
cash equivalents
|
40.0
|
|
|
(21.0)
|
|
Cash and cash
equivalents, beginning of period
|
51.5
|
|
|
72.5
|
|
Cash and cash
equivalents, end of period
|
$
|
91.5
|
|
|
$
|
51.5
|
|
Supplemental cash
flow information
|
|
|
|
Cash payments for
interest
|
$
|
0.4
|
|
|
$
|
0.5
|
|
Cash payments
(refunds) for income taxes
|
(1.8)
|
|
|
16.1
|
|
Property, plant and
equipment accrued in accounts payable
|
2.1
|
|
|
1.0
|
|
TESCO
CORPORATION
Segment
Results
(in millions,
except per share information)
|
|
|
Three Months
Ended
December 31,
|
|
Three Months
Ended
September 30,
|
|
Year Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Segment
revenue
|
(Unaudited)
|
|
(Unaudited)
|
|
|
Products
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
4.8
|
|
|
$
|
8.1
|
|
|
$
|
4.4
|
|
|
$
|
21.8
|
|
|
$
|
45.0
|
|
Rental
services
|
6.7
|
|
|
9.9
|
|
|
7.1
|
|
|
26.2
|
|
|
61.7
|
|
Aftermarket sales and
service
|
7.3
|
|
|
7.5
|
|
|
5.5
|
|
|
24.9
|
|
|
39.0
|
|
|
18.8
|
|
|
25.5
|
|
|
17.0
|
|
|
72.9
|
|
|
145.7
|
|
Tubular
Services
|
|
|
|
|
|
|
|
|
|
Land
|
9.6
|
|
|
19.0
|
|
|
7.7
|
|
|
36.0
|
|
|
94.0
|
|
Offshore
|
4.8
|
|
|
6.6
|
|
|
4.1
|
|
|
20.6
|
|
|
32.6
|
|
CDS, Parts &
Accessories
|
2.1
|
|
|
1.1
|
|
|
1.6
|
|
|
5.2
|
|
|
7.4
|
|
|
16.5
|
|
|
26.7
|
|
|
13.4
|
|
|
61.8
|
|
|
134.0
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
revenue
|
$
|
35.3
|
|
|
$
|
52.2
|
|
|
$
|
30.4
|
|
|
$
|
134.7
|
|
|
$
|
279.7
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
loss:
|
|
|
|
|
|
|
|
|
|
Products
|
$
|
(5.3)
|
|
|
$
|
(16.7)
|
|
|
$
|
(7.4)
|
|
|
$
|
(54.6)
|
|
|
$
|
(18.9)
|
|
Tubular
Services
|
(6.9)
|
|
|
(41.8)
|
|
|
(8.0)
|
|
|
(30.2)
|
|
|
(46.1)
|
|
Research and
Engineering
|
(1.5)
|
|
|
(2.2)
|
|
|
(1.2)
|
|
|
(5.8)
|
|
|
(9.2)
|
|
Corporate and
Other
|
(5.2)
|
|
|
(6.6)
|
|
|
(5.3)
|
|
|
(24.2)
|
|
|
(28.2)
|
|
Operating
loss
|
$
|
(18.9)
|
|
|
$
|
(67.3)
|
|
|
$
|
(21.9)
|
|
|
$
|
(114.8)
|
|
|
$
|
(102.4)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
consolidated net loss
|
$
|
(20.1)
|
|
|
$
|
(78.1)
|
|
|
$
|
(22.1)
|
|
|
$
|
(117.9)
|
|
|
$
|
(133.8)
|
|
U.S. GAAP loss per
share (diluted)
|
$
|
(0.43)
|
|
|
$
|
(2.00)
|
|
|
$
|
(0.48)
|
|
|
$
|
(2.73)
|
|
|
$
|
(3.43)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(a) (as defined)
|
$
|
(4.4)
|
|
|
$
|
(2.0)
|
|
|
$
|
(9.1)
|
|
|
$
|
(28.7)
|
|
|
$
|
8.3
|
|
|
______________________
|
(a)
|
See explanation of Non-GAAP measure.
|
Non-GAAP Measures
Our management reports our financial statements in accordance
with United States Generally Accepted Accounting Principles ("U.S.
GAAP") but evaluates our performance based on non-GAAP measures as
defined under the SEC's Regulation G. These measures may not be
comparable to similarly titled measures employed by other companies
and is not a measure of performance calculated in accordance with
GAAP. Non-GAAP measures should not be considered in isolation or as
substitutes for operating income, net income or loss, cash flows
provided by operating, investing and financing activities, or other
income or cash flow statement data prepared in accordance with
GAAP.
Our management uses Non-GAAP measures:
- to assess the performance of the Company's operations;
- as a method used to evaluate potential acquisitions;
- in presentations to our Board of Directors to enable them to
have the same consistent measurement basis of operating performance
used by management; and
- in communications with investors, analysts, lenders, and others
concerning our financial performance.
TESCO
CORPORATION
Non-GAAP Measure -
Adjusted EBITDA (1) (Unaudited)
(in
millions)
|
|
|
Three Months
Ended
December 31,
|
|
Three Months
Ended
September 30,
|
|
Year Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Net loss under U.S.
GAAP
|
$
|
(20.1)
|
|
|
$
|
(78.1)
|
|
|
$
|
(22.1)
|
|
|
$
|
(117.9)
|
|
|
$
|
(133.8)
|
|
Income tax expense
(benefit)
|
0.2
|
|
|
1.8
|
|
|
(0.6)
|
|
|
(0.1)
|
|
|
15.3
|
|
Depreciation and
amortization
|
6.8
|
|
|
9.0
|
|
|
7.3
|
|
|
29.3
|
|
|
38.1
|
|
Interest
expense
|
—
|
|
|
0.5
|
|
|
0.2
|
|
|
0.8
|
|
|
1.3
|
|
Stock compensation
expense—non-cash
|
1.8
|
|
|
0.5
|
|
|
1.1
|
|
|
5.0
|
|
|
3.5
|
|
Severance &
restructuring charges
|
2.3
|
|
|
3.6
|
|
|
1.0
|
|
|
9.2
|
|
|
10.9
|
|
Bad debt from certain
accounts
|
3.1
|
|
|
3.2
|
|
|
0.3
|
|
|
3.7
|
|
|
3.6
|
|
Foreign exchange
loss
|
1.1
|
|
|
8.6
|
|
|
0.3
|
|
|
2.7
|
|
|
15.1
|
|
Asset sale
reserves
|
—
|
|
|
—
|
|
|
(0.5)
|
|
|
(3.5)
|
|
|
—
|
|
Venezuela
charges
|
—
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
Warranty & legal
reserves
|
(0.4)
|
|
|
0.3
|
|
|
0.7
|
|
|
1.0
|
|
|
1.6
|
|
Inventory
reserves
|
0.8
|
|
|
13.5
|
|
|
3.1
|
|
|
5.2
|
|
|
16.3
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.4
|
|
|
—
|
|
Goodwill
impairment
|
—
|
|
|
34.4
|
|
|
—
|
|
|
—
|
|
|
34.4
|
|
Financial revision
costs
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Adjusted
EBITDA
|
$
|
(4.4)
|
|
|
$
|
(2.0)
|
|
|
$
|
(9.1)
|
|
|
$
|
(28.7)
|
|
|
$
|
8.3
|
|
|
|
(1)
|
Adjusted EBITDA
consists of earnings (net income or loss) attributable to TESCO
before interest expense, income tax expense (benefit), depreciation
and amortization, severance and restructuring charges, foreign
exchange gains or losses, noted income or charges from certain
accounts, non-cash stock compensation, non-cash impairments and
other non-cash items.
|
We believe Adjusted EBITDA is useful to an investor in
evaluating our operating performance because:
- it is widely used by investors in our industry to measure a
company's operating performance without regard to items such as
interest expense, income tax expense (benefit), depreciation and
amortization, which can vary substantially from company to company
depending upon accounting methods and book value of assets,
severance and restructuring charges, financing methods, capital
structure and the method by which assets were acquired;
- it helps investors more meaningfully evaluate and compare the
results of our operations from period to period by removing the
impact of our capital structure (primarily interest), merger and
acquisition transactions (primarily gains/losses on sale of a
business), and asset base (primarily depreciation and amortization)
and actions that do not affect liquidity (stock compensation
expense and non-cash impairments) from our operating results;
and
- it helps investors identify items that are within our
operational control. Depreciation and amortization charges, while a
component of operating income, are fixed at the time of the asset
purchase in accordance with the depreciable lives of the related
asset and as such are not a directly controllable period operating
charge.
TESCO
CORPORATION
Reconciliation of
GAAP Net Income (Loss) to Adjusted Net Income (Loss) (2)
(Unaudited)
(in
millions. except earnings per share data)
|
|
|
Three Months
Ended
December 31,
|
|
Three Months
Ended
September 30,
|
|
Year Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
Net loss under U.S.
GAAP
|
$
|
(20.1)
|
|
|
$
|
(78.1)
|
|
|
$
|
(22.1)
|
|
|
$
|
(117.9)
|
|
|
$
|
(133.8)
|
|
Severance &
restructuring charges
|
2.2
|
|
|
3.1
|
|
|
1.0
|
|
|
8.8
|
|
|
8.8
|
|
Bad debt on certain
accounts
|
3.1
|
|
|
3.1
|
|
|
0.3
|
|
|
3.7
|
|
|
3.4
|
|
Certain foreign
exchange losses
|
1.1
|
|
|
8.3
|
|
|
0.2
|
|
|
2.6
|
|
|
13.2
|
|
Asset sale
reserves
|
—
|
|
|
—
|
|
|
(0.5)
|
|
|
(3.5)
|
|
|
—
|
|
Venezuela
charges
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Warranty & legal
reserves
|
(0.4)
|
|
|
0.3
|
|
|
0.7
|
|
|
1.0
|
|
|
1.3
|
|
Inventory
reserves
|
0.8
|
|
|
13.1
|
|
|
2.9
|
|
|
5.0
|
|
|
15.9
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
35.5
|
|
|
—
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.5
|
|
|
—
|
|
Goodwill
impairment
|
—
|
|
|
30.1
|
|
|
—
|
|
|
—
|
|
|
30.1
|
|
Financial revision
costs
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
Certain tax-related
charges
|
—
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
|
22.5
|
|
Adjusted net
loss
|
$
|
(13.3)
|
|
|
$
|
(13.4)
|
|
|
$
|
(17.3)
|
|
|
$
|
(64.3)
|
|
|
$
|
(37.2)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per
share under U.S. GAAP
|
$
|
(0.43)
|
|
|
$
|
(2.00)
|
|
|
$
|
(0.48)
|
|
|
$
|
(2.73)
|
|
|
$
|
(3.43)
|
|
Severance &
restructuring charges
|
0.05
|
|
|
0.08
|
|
|
0.02
|
|
|
0.20
|
|
|
0.23
|
|
Bad debt on certain
accounts
|
0.07
|
|
|
0.08
|
|
|
0.01
|
|
|
0.09
|
|
|
0.09
|
|
Certain foreign
exchange losses
|
0.02
|
|
|
0.21
|
|
|
—
|
|
|
0.06
|
|
|
0.34
|
|
Asset sale
reserves
|
—
|
|
|
—
|
|
|
(0.01)
|
|
|
(0.08)
|
|
|
—
|
|
Venezuela
charges
|
—
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Warranty & legal
reserves
|
(0.01)
|
|
|
0.01
|
|
|
0.02
|
|
|
0.02
|
|
|
0.03
|
|
Inventory
reserves
|
0.02
|
|
|
0.34
|
|
|
0.07
|
|
|
0.12
|
|
|
0.41
|
|
Long-lived asset
impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
0.82
|
|
|
—
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Goodwill
impairment
|
—
|
|
|
0.77
|
|
|
—
|
|
|
—
|
|
|
0.77
|
|
Financial revision
costs
|
—
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
|
0.03
|
|
Certain tax-related
charges
|
—
|
|
|
0.16
|
|
|
—
|
|
|
—
|
|
|
0.58
|
|
Adjusted diluted loss
per share
|
$
|
(0.28)
|
|
|
$
|
(0.33)
|
|
|
$
|
(0.37)
|
|
|
$
|
(1.49)
|
|
|
$
|
(0.94)
|
|
|
|
(2)
|
Adjusted net income
(loss) is a non-GAAP measure comprised of net income (loss)
attributable to TESCO excluding the impact of severance and
restructuring charges, non-cash impairments, noted income or
charges from certain accounts and certain tax-related
charges.
|
We believe adjusted net income (loss) is useful to an investor
in evaluating our operating performance because:
- it is a consistent measure of the underlying results of the
Company's business by excluding items that could mask the Company's
operating performance;
- it is widely used by investors in our industry to measure a
company's operating performance, especially when comparing those
results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluding items to be outside of the Company's normal operating
results; and
- it helps investors identify and analyze underlying trends in
the business.
TESCO
CORPORATION
Non-GAAP Measure -
Adjusted Operating Income (Loss)(3)
(Unaudited)
(in
millions)
|
|
|
Three Months Ended
December 31, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate
& Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(5.3)
|
|
|
$
|
(6.9)
|
|
|
$
|
(1.5)
|
|
|
$
|
(5.2)
|
|
|
$
|
(18.9)
|
|
Severance &
restructuring charges
|
0.3
|
|
|
1.5
|
|
|
0.2
|
|
|
0.3
|
|
|
2.3
|
|
Bad debt on certain
accounts
|
3.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
Warranty & legal
reserves
|
(0.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4)
|
|
Inventory
reserves
|
0.7
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Adjusted operating
loss
|
$
|
(1.6)
|
|
|
$
|
(5.3)
|
|
|
$
|
(1.3)
|
|
|
$
|
(4.9)
|
|
|
$
|
(13.1)
|
|
|
Three Months Ended
December 31, 2015
|
|
Products
|
|
Tubular
Services
|
|
Research
& Engineering
|
|
Corporate
& Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(16.7)
|
|
|
$
|
(41.8)
|
|
|
$
|
(2.2)
|
|
|
$
|
(6.6)
|
|
|
$
|
(67.3)
|
|
Severance &
restructuring charges
|
1.5
|
|
|
1.4
|
|
|
0.1
|
|
|
0.6
|
|
|
3.6
|
|
Inventory
reserves
|
11.2
|
|
|
2.3
|
|
|
—
|
|
|
—
|
|
|
13.5
|
|
Bad debt on certain
accounts
|
2.0
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
3.2
|
|
Warranty & legal
reserves
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Venezuela
charges
|
0.4
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
Goodwill
impairment
|
1.7
|
|
|
32.7
|
|
|
—
|
|
|
—
|
|
|
34.4
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Adjusted operating
income (loss)
|
$
|
0.4
|
|
|
$
|
(4.1)
|
|
|
$
|
(2.1)
|
|
|
$
|
(5.8)
|
|
|
$
|
(11.6)
|
|
|
Three Months Ended
September 30, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate
& Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(7.4)
|
|
|
$
|
(8.0)
|
|
|
$
|
(1.2)
|
|
|
$
|
(5.3)
|
|
|
$
|
(21.9)
|
|
Severance &
restructuring charges
|
—
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Bad debt on certain
accounts
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Warranty & legal
reserves
|
0.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
Asset sale
reserves
|
(0.4)
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
(0.5)
|
|
Inventory
reserves
|
3.0
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Adjusted operating
loss
|
$
|
(3.8)
|
|
|
$
|
(7.2)
|
|
|
$
|
(1.2)
|
|
|
$
|
(5.2)
|
|
|
$
|
(17.4)
|
|
|
Year Ended
December 31, 2016
|
|
Products
|
|
Tubular
Services
|
|
Research
& Engineering
|
|
Corporate
& Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(54.6)
|
|
|
$
|
(30.2)
|
|
|
$
|
(5.8)
|
|
|
$
|
(24.2)
|
|
|
$
|
(114.8)
|
|
Severance &
restructuring charges
|
1.7
|
|
|
6.6
|
|
|
0.2
|
|
|
0.5
|
|
|
9.0
|
|
Bad debt on certain
accounts
|
3.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.7
|
|
Warranty & legal
reserves
|
0.3
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
Asset sale
reserves
|
(1.2)
|
|
|
(2.3)
|
|
|
—
|
|
|
—
|
|
|
(3.5)
|
|
Inventory
reserves
|
4.7
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
5.2
|
|
Long-lived asset
impairments
|
33.6
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
35.5
|
|
Credit facility
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Adjusted operating
loss
|
$
|
(11.8)
|
|
|
$
|
(24.7)
|
|
|
$
|
(5.6)
|
|
|
$
|
(21.6)
|
|
|
$
|
(63.7)
|
|
|
Year Ended
December 31, 2015
|
|
Products
|
|
Tubular
Services
|
|
Research &
Engineering
|
|
Corporate
& Other
|
|
Total
|
Operating loss under
U.S. GAAP
|
$
|
(18.9)
|
|
|
$
|
(46.1)
|
|
|
$
|
(9.2)
|
|
|
$
|
(28.2)
|
|
|
$
|
(102.4)
|
|
Severance &
restructuring charges
|
5.5
|
|
|
3.9
|
|
|
0.1
|
|
|
1.4
|
|
|
10.9
|
|
Bad debt on certain
accounts
|
2.4
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
3.6
|
|
Warranty & legal
reserves
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
Inventory
reserves
|
13.4
|
|
|
2.9
|
|
|
—
|
|
|
—
|
|
|
16.3
|
|
Venezuela
charges
|
0.4
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
Goodwill
impairment
|
1.7
|
|
|
32.7
|
|
|
—
|
|
|
—
|
|
|
34.4
|
|
Financial revision
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
1.5
|
|
Adjusted operating
income (loss)
|
$
|
6.1
|
|
|
$
|
(5.3)
|
|
|
$
|
(9.1)
|
|
|
$
|
(25.3)
|
|
|
$
|
(33.6)
|
|
|
|
(3)
|
Adjusted operating
income (loss) is a non-GAAP measure comprised of operating income
(loss) attributable to TESCO excluding the impact of severance and
restructuring charges, non-cash impairments and noted income or
charges from certain accounts. Management uses adjusted operating
income (loss) as a measure of the performance of the Company's
operations.
|
We believe adjusted operating income (loss) is useful to an
investor in evaluating our operating performance because:
- it is a consistent measure of the underlying results of the
Company's business by excluding items that could mask the Company's
operating performance;
- it is widely used by investors in our industry to measure a
company's operating performance, especially when comparing those
results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluding items to be outside of the Company's normal operating
results; and
- it helps investors identify and analyze underlying trends in
the business.
TESCO
CORPORATION
Non-GAAP Measure -
Free Cash Flow(4) (Unaudited)
(in
millions)
|
|
|
|
Three Months
Ended
December 31,
2016
|
|
Three Months
Ended
September 30,
2016
|
|
Year Ended
December 31,
2016
|
Net cash provided by
(used in) operating activities
|
|
$
|
3.5
|
|
|
$
|
(4.3)
|
|
|
$
|
(2.1)
|
|
Capital
expenditures
|
|
(2.6)
|
|
|
(2.5)
|
|
|
(7.1)
|
|
Proceeds on asset
sales
|
|
1.2
|
|
|
0.3
|
|
|
4.1
|
|
Free cash
flow
|
|
2.1
|
|
|
(6.5)
|
|
|
(5.1)
|
|
Severance &
restructuring payments
|
|
(0.4)
|
|
|
(0.8)
|
|
|
(7.8)
|
|
Adjusted free cash
flow
|
|
$
|
2.5
|
|
|
$
|
(5.7)
|
|
|
$
|
2.7
|
|
|
|
(4)
|
Free cash flow is a
non-GAAP measure comprised of cash flow from operations, capital
expenditures and proceeds on asset sales. Adjusted free cash flow
excludes the impact of severance and restructuring
payments.
|
We believe free cash flow is useful to an investor in evaluating
our operating performance because:
- it measures the Company's ability to generate cash;
- it is widely used by investors in our industry to measure a
company's cash flow performance; and
- it helps investors identify and analyze underlying trends in
the business.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/tesco-corporation-reports-fourth-quarter-2016-results-300414460.html
SOURCE Tesco Corporation